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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






2. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






3. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






4. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






5. Total product divided by labor employed. APL = TPL/L






6. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






7. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






8. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






9. 0 < Ei < 1






10. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






11. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






12. Ed = 1






13. The additional cost incurred from the consumption of the next unit of a good or a service






14. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






15. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






16. Entry of new firms shifts the cost curves for all firms downward






17. Ed = 0 - no response to price change






18. Ed = (%dQd)/(%dP). Ignore negative sign






19. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






20. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






21. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






22. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






23. AVC = TVC/Q






24. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






25. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






26. ATC = TC/Q = AFC + AVC






27. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






28. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






29. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






30. Exists if a producer can produce more of a good than all other producers






31. The lost net benefit to society caused by a movement away from the competitive market equilibrium






32. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






33. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






34. Product demand - productivity - prices of other resources - and complementary resources






35. The marginal utility from consumption of more and more of that item falls over time






36. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






37. The most desirable alternative given up as the result of a decision






38. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






39. Ed = 8 - infinite change in demand to price change






40. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






41. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






42. The imbalance between limited productive resources and unlimited human wants






43. The sum of consumer surplus and producer surplus






44. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






45. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






46. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






47. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






48. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






49. The practice of selling essentially the same good to different groups of consumers at different prices






50. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary